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Fix & Flip Examples
Example I: 90% of Purchase Price Plus 90% of Fix-up For Qualified Properties and Borrowers (Each loan request is subject to underwriting and approval and factors considered include, but are not limited to, the strength of the property as well as the borrower’s credit, liquidity, net worth, income, and experience.)
LOAN DOWNPAYMENT
Purchase Price = $150,000 x 90% = $135,000 10% From Borrower = $15,000
+ Improvement Costs = 20,000 x 90% = 18,000 10% From Borrower = 2,000 (Instead of $20,000 Out of Pocket!)
TOTAL = $153,000 $17,000*
* Downpayment From Borrower May Come From A Variety of Sources (Subject to Underwriting and Qualification) Such As: Cross-Collateralization – See Example 3; Home Equity Lines; Partner Funds; Secondary Financing; Gifted Funds; Owner-carry Backs; and More.
Lender will obtain an “as if complete” appraised value based on the improvements provided by the borrower. The loan amount needs to be 80% of this value. So, in this example above, with a $153,000 loan amount divided by .80 (which is 80%), the “as if complete” appraised value will need to be $191,250. It is logical that the appraised value will need to be higher than the purchase price plus improvement costs because the borrower will expect to make profit.
Example 2: 80% of Purchase Price Plus 80% of Fix-up For Qualified Properties and Borrowers. (Properties and borrowers not qualify for the 90% program may qualify for 80 to 85%, subject to underwriting and approval.)
LOAN DOWNPAYMENT
Purchase Price = $150,000 x 80% = $120,000 20% From Borrower = $30,000
+ Improvement Costs = 20,000 x 80% = 16,000 20% From Borrower = 4,000 (Instead of $20,000 Out of Pocket!)
TOTAL = $136,000 $34,000
* Downpayment From Borrower May Come From A Variety of Sources (Subject to Underwriting and Qualification) Such As: Cross-Collateralization – See Example 3; Home Equity Lines; Partner Funds; Secondary Financing; Owner-carry Backs; and More.
Lender will obtain an “as if complete” appraised value based on the improvements provided by the borrower. The loan amount needs to be 70% of this value. So, in this example above, with a $136,000 loan amount divided by .70 (which is 80%), the “as if complete” appraised value will need to be $194,285. It is logical that the appraised value will need to be higher than the purchase price plus improvement costs because the borrower will expect to make profit.
Example 3: CROSS-COLLATERALIZATION
If the borrower already owns other real estate, such as a primary residence, second home, investment property, commercial real estate, or land, there may be enough equity (at a proper loan-to-value percentage) in that property to use as the downpayment for the new fix-and-flip property being purchased. So, the borrower may be able to put that equity to use and not have to put any cash in to the transaction. Many of our clients have successfully used cross-collateralization. Ask your loan specialist for details.
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Loans For Investors and Rehab
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No Limit On Amount of Properties Owned
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No Pre-Paymeny Penalty
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Loan = 90% Aqusisition + 90% Cost of Improvements
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Loans can Be More Than the Purchase Price
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Loans Are One Year Balloon.... Interest Only
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Rates Are Prime + 2.75
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1-3 Origination Points (depending on project)
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Full Income Doc. Only
Investor Should Have Some Real Estate or Building Experience
No Foreclosures or Bankruptcies
Minimum Fico 650
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